Research On The Impairment Risk Of M&A Goodwill

In 2014,the State Council issued the "Opinions on Further Optimizing the Market Environment for Enterprise Mergers and Reorganizations",which carried out institutional innovations on corporate mergers and acquisitions and reorganizations in terms of administrative approval,transaction mechanisms,and fiscal and taxation policies.The liberalization of the system has created a loose,profitable,and even regulatory arbitrage external environment for listed companies' mergers and acquisitions,stimulated companies' strong willingness to expand through mergers and reorganizations,and triggered a new round of mergers and acquisitions of listed companies.While the scale of mergers and acquisitions has rapidly expanded,the performance growth of listed companies has also entered an explosive period.But at the same time,a series of problems have also arisen.For example,the scale of goodwill continues to expand,and its proportion of net assets has also risen rapidly,exposing the risk of impairment.In February 2017,the China Securities Regulatory Commission clearly mentioned in a related proposal that a large amount of goodwill impairment will directly eat up corporate operating profits and drag down the development of listed companies,and explained that it will focus on the situation of large-scale provision for goodwill impairment.Therefore,this article intends to use the case of high-value goodwill impairment after the acquisition of SiNuo Industries by Nations Technologies Inc.,analyze the causes of the impairment risk of listed companies' mergers and acquisitions,and propose targeted suggestions based on the results of the case analysis to try to enrich the goodwill impairment risk Practice and theoretical research.This article uses the literature research method to review and sort out the current research on goodwill impairment risks by domestic and foreign scholars.On this basis,it summarizes the basic concepts of goodwill and goodwill impairment,and conducts related theoretical studies.Carried out a collation and analysis.Secondly,this article gives a general introduction to the process of Nations Technologies Inc.'s acquisition of SiNuo Industries and the value of goodwill and uses the event analysis method to analyze the economic impact of this goodwill impairment.Thirdly,this article uses the case study method to analyze the causes of national technology goodwill impairment risk from the perspectives of M&A valuation,performance commitment and earnings management,and the research finds:(1)Forecast of operating income,operating costs and operating capabilities in the process of M&A valuation unreasonable results in the valuation premium of the income approach are falsely high,thereby increasing the risk of goodwill impairment;(2)Performance commitments affect the valuation of mergers and acquisitions and the formulation of performance commitment compensation agreements unreasonably increases the default risk of performance commitment parties;(3)Nations Technologies Inc.earnings management motivation to increase the risk of impairment of goodwill.Finally,this article evaluates the measures taken by Nations Technologies Inc.to deal with the risk of impairment of goodwill,and found that Nations Technologies Inc.uses the following methods:(1)Cargo preservation methods to reduce performance losses;(2)Adjust the purchase consideration and increase the performance compensation ceiling.However,the above risk response measures did not effectively reduce the impact of the impairment of goodwill.Based on the above analysis,this article puts forward specific suggestions for preventing goodwill impairment risk,so as to provide reference significance for other enterprises to prevent goodwill impairment risk in the process of mergers and acquisitions.